Will South Africa Decline Like Zimbabwe?

This month, 25 years ago, Nelson Mandela ascended to the presidency of South Africa, marking an end to the evil apartheid regime and embarking on a path of reconciliation.

Today, South Africa’s new president, Cyril Ramaphosa, stands at an important crossroads. It remains to be seen whether he will lead the country down a treacherous path of “land reform,” which would undermine private property rights and enable the government to seize property without compensation.

South Africa’s neighbor Zimbabwe provides a cautionary tale. Beginning in 2000, the country’s Fast-Track Land Reform Program kicked off violent invasions of white-owned farms. This act of retribution for decades of colonization had disastrous effects, even for the people it was supposed to help. The title to the redistributed farmland went to the government or political insiders.

Agricultural output in the country, once known as “Africa’s breadbasket,” declined sharply, as did foreign investment alarmed by the apparent absence of the rule of law. By the end of the decade, Zimbabwe had endured one of the worst hyperinflations in history.

There are reasons to believe South Africa will avoid this fate, however.

While the country’s rankings in economic freedom indices have fallen over the past decade, South Africa has important institutional strengths: a sound constitution, an independent judiciary, and a central bank that has kept the currency stable. The business community is strong and views Ramaphosa with some optimism, believing that his grasp of economics and respect for the rule of law will enable him to strike a blow against the sort of corruption that festered under the previous president, Jacob Zuma.

To Ramaphosa’s credit, he has already begun to take on South Africa’s chaotic and inefficient state-owned enterprises. He is, however, flirting with danger in pursuing the land expropriation agenda put forward by the hard-left Economic Freedom Fighters party.

Temba Nolutshungu — a former anti-apartheid activist in collaboration with his colleagues in the Free Market Foundation of South Africa — points a different way forward. The Free Market Foundation has assisted hundreds of former victims of apartheid in navigating the process of claiming title to land they already occupy.

As economists such as Hernando De Soto have shown, establishing property rights brings to life otherwise “dead capital” and helps people in the developing world create value with their newfound assets. Property ownership is powerful. Owners are incentivized to invest in their land, using their homes as capital to launch new businesses, seek better education, and grow the local economy.

Nolutshungu argues that empowering the poor through property rights can take place without expropriation and the risks it entails: “Denying blacks the right to own property for most of the last century was a heinous violation. But the answer comes in strengthening property rights, not in weakening them through government expropriation. The government could help indigent families by providing freehold title deeds to government-owned land it has acknowledged is superfluous.”

By contrast, when the government seizes private property for redistribution — even under the auspices of trying to right past wrongs — the predictable effect will be a decrease in economic productivity, capital flight to jurisdictions more faithful to the rule of law, and a stagnant economy that keeps people in poverty.

Ramaphosa is in a difficult position, trying to shore up an already unraveling political coalition by trying to be all things to vastly divergent constituencies. One thing on which everyone agrees, however, is that 25 years after apartheid, South Africa’s black majority suffers from poverty, unemployment, poor health and education services, and a lack of property rights. Unfortunately, the land reform measures under consideration are almost certain to make the situation worse.

Let’s hope Ramaphosa will heed the cautionary lesson provided by Zimbabwe and charter a course that promotes prosperity for South Africa’s most vulnerable citizens.

Brad Lips is CEO of Atlas Network, a Washington-based nonprofit dedicated to breaking down the barriers to prosperity and opportunity by working with a network of more than 480 independent organizations in over 90 countries around the world.